Correlation Between Microsoft and CSL
Can any of the company-specific risk be diversified away by investing in both Microsoft and CSL at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Microsoft and CSL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and CSL, you can compare the effects of market volatilities on Microsoft and CSL and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Microsoft with a short position of CSL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and CSL.
Diversification Opportunities for Microsoft and CSL
Good diversification
The 3 months correlation between Microsoft and CSL is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and CSL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSL and Microsoft is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Microsoft are associated (or correlated) with CSL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSL has no effect on the direction of Microsoft i.e., Microsoft and CSL go up and down completely randomly.
Pair Corralation between Microsoft and CSL
Given the investment horizon of 90 days Microsoft is expected to generate 1.33 times more return on investment than CSL. However, Microsoft is 1.33 times more volatile than CSL. It trades about 0.09 of its potential returns per unit of risk. CSL is currently generating about 0.0 per unit of risk. If you would invest 24,146 in Microsoft on August 30, 2024 and sell it today you would earn a total of 18,153 from holding Microsoft or generate 75.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.4% |
| Values | Daily Returns |
Microsoft vs. CSL
Performance |
| Timeline |
| Microsoft |
| CSL |
Microsoft and CSL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and CSL
The main advantage of trading using opposite Microsoft and CSL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, CSL can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in CSL will offset losses from the drop in CSL's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| CSL vs. M3 Mining | CSL vs. Sandon Capital Investments | CSL vs. TPG Telecom | CSL vs. WiseTech Global Limited |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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